FTSE 100, DAX 40 and S&P 500 take a hit on US bank failure contagion fears

​​​FTSE 100 tracks Wall Street lower

​The FTSE 100 tracked US equity indices lower ahead of Wednesday’s Federal Open Market Committee (Fed) interest rate decision where a 25-basis point hike, taking the fed funds rate to between 5.00% to 5.25%, is expected. ​

In doing so, the blue chip index dropped to a three-week low and is approaching the 7,724 to 7,708 late January lows which may act as support. Further down lies the 38.2% Fibonacci retracement of the March-to-April advance at 7,657. ​

Downside pressure should prevail while Tuesday’s high at 7,897 isn’t being overcome. Below it minor resistance can be spotted at the late February 7,854 low.

​DAX 40 forms interim top around the psychological 16,000 mark

​The DAX 40 earlier this week traded at levels last seen in January 2022 around the minor psychological 16,000 mark, buoyed by better-than-expected earnings from big tech in the US, but gave back some of its recent gains ahead of Wednesday’s Fed and Thursday’s European Central Bank (ECB) meetings, at both of which a 25-basis point rate hike is likely to be seen. ​

Worryingly for the bulls, at least in the short-term, is that this week’s high has not been accompanied by a higher reading of the Relative Strength Index (RSI), meaning that negative divergence is visible. ​Since in most cases it acts as a precursor to at least a correction against the trend being seen, and sometimes warns of a significant reversal, last week’s low at 15,694 needs to be closely watched. ​

A fall through and daily chart close below 15,694 would confirm an interim top formation and would push the 55-day simple moving average (SMA) at 15,505 to the fore as well as the early April low at 15,481.

​Immediate resistance can be spotted at the 12 April high at 15,832, followed by the 19 April high at 15,923.

​US regional bank systemic fears spark S&P 500 sell-off ​

The S&P 500 has come to within a whisker of its 4195 February peak at the beginning of May before rapidly giving back some of its recent gains ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting as rumours of another US bank failure sparked contagion fears and led to a sharp sell-off on Tuesday.

​The index managed to hold marginally above its March-to-May uptrend line at 4,089, though, a fall through which would lead to the late April low at 4050 being revisited, a drop through which would indicate that a top is being formed. ​

The negative divergence on the daily RSI also points to possible further consolidation being on the cards this week. ​

Minor resistance can be seen at the 4 April and 24 April highs at 4,141 to 4,142 and at the 18 April peak at 4,172.